Canada is scrapping the penny, ending production this year of a coin that weighs down consumers’ pockets while adding little to their purchasing power.
The government announced in Thursday’s federal budget that it will shortly jettison the one-cent coin – a casualty of Ottawa’s drive for efficiency and thrift.
“It costs taxpayers a penny-and-a-half every time we make one,” Finance Minister Jim Flaherty told the Commons, adding the move will save taxpayers $11-million annually.
Mr. Flaherty, whose department described the penny as a “nuisance” in budget documents, said the 2.35-gram coin is now more trouble than it’s worth.
“Pennies take up too much space on our dressers at home,” Mr. Flaherty added. “They take up far too much time for small businesses trying to grow and create jobs.”
The last one-cent coin will be minted this April, ending what federal officials say is close to 150 years of Canadian penny production. The Royal Canadian Mint will stop distributing pennies to financial institutions in the fall of 2012 and the government will work to withdraw one-cent coins from circulation.
The increasing scarcity of pennies means Canadians will have to get used to cash transactions being rounded off if they’ve got no pennies on hand.
Ottawa is suggesting businesses round off cash transactions to the nearest five-cent increment but says it’s leaving this to businesses to work out for themselves.
This rounding off would occur after taxes had been applied to the purchase and would not be necessary for credit or debit transactions.
Retailers and restaurateurs, however, are urging Ottawa to clearly explain to Canadians what is happening to cash transactions – so customers don’t feel they’re getting ripped off and that there’s a level playing field for all businesses.
Not everyone is relieved to see the one-cent coin abolished.
“As a coin collector, it’s a black day because the penny has been such an integral part of Canadian history. When Canada was young, a penny was a lot of money,” said Brian Grant Duff with All Nations Stamp and Coin in Vancouver.
He predicted the five-cent coin’s days are now numbered too.
The Royal Canadian Mint produced 660 million pennies in 2011, federal officials said.
The Canadian government is hardly alone in scrapping the penny. Federal officials said they could count at least 17 other countries that have ceased production of low-denomination coins over the past four decades.
The Harper government says savings for business and consumers will vastly exceed what Ottawa recoups by killing the penny.
A study by one Canadian financial institution, Desjardins Group, estimates the economic costs of the penny for the private sector total $150-million annually. This includes counting, storing and transporting the coins.
Ottawa says it won’t be policing consumer-business transactions, but added that “businesses are expected to round prices in a fair, consistent and transparent manner.”
It couldn’t guarantee consumers would be better off but cited a 2005 Bank of Canada study that concluded the inflationary impact of eliminating the penny would be “small or non-existent.”
The government had no estimates Thursday on how many pennies remain in circulation, including those piling up in jars or cans. It noted that the study by Desjardins Group estimates Canadians could be hoarding several billion pennies.
Federal officials said more than 35 billion pennies have been minted in Canada in the past 104 years. This, they noted Thursday, would weigh 94 million kilograms – or as much as 1,500 Leopard 2 tanks.
The federal government says it will encourage charities to collect pennies from Canadians and redeem them through banks and the mint as a fundraising venture.